Federal court denies FERC jurisdiction in PG&E bankruptcy case

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The future of power purchase agreements held by Pacific Gas & Electric will be decided in a bankruptcy court, and not at the Federal Energy Regulatory Commission, a federal judge ruled Monday.

FERC asserted it had "concurrent jurisdiction" over the power contracts and could prevent them from being altered in PG&E's bankruptcy proceeding. The federal court, however, said the bankruptcy court has sufficient information to rule and confining the decision there would be the most "efficient use of judicial resources."

The ruling is a victory for PG&E, which could seek to exit some of its higher-priced renewable energy PPAs in the proceeding. California utility regulators, however, could also seek a role in the case, Bloomberg Law reports.

Dive Insight:

The ruling from the U.S. District Court for the Northern District of California is the latest installment in the jurisdictional tussle over PG&E's bankruptcy.

In January, just before PG&E filed for Chapter 11 protections, independent generators Exelon and NextEra asked FERC to preserve the PPAs they had signed with the utility.

PG&E holds 387 PPAs with more than 350 companies worth about $42 billion, according to court documents. Generators are concerned PG&E will attempt to exit some of its older, more expensive renewable energy contracts to cut its liabilities in the bankruptcy proceeding.

"These agreements are still subject to the Commission's jurisdiction and the Commission maintains discretion to exercise its authority," the agency wrote in its response to Exelon and NextEra.

PG&E responded by asking the court for an injunction against FERC's assertion of authority. While the utility has not decided whether to exit contracts, market conditions require that it "comprehensively assess how each PPA fits within the [its] energy portfolio," it wrote.

FERC shot back, asking the Northern District to allow it to assess the PG&E contracts. Judge Haywood Gilliam, however, rejected the request to withdraw the reference to the bankruptcy court.

"[T]he Court finds that the most 'efficient use of judicial resources' is to deny the withdrawal of reference and permit the bankruptcy court to rule," he wrote. "And given that the bankruptcy court intends to rule ... in short order, denying the withdrawal requests will not result in undue 'delay and costs.'"

Gilliam's ruling may not be the final word on bankruptcy court jurisdiction. Last week, the general counsel for the California Public Utilities Commission told state lawmakers PG&E would need its permission to withdraw from any PPAs, according to Bloomberg Law.